Loans are everyday life – they allow you to buy things faster that would have to save money for months or even years, but sometimes, as circumstances change, they turn into a burden that can be much harder to drop than to build.
The worst way to get rid of loans is to take new loans. This ends the deadlock early or late – bad credit history, which can make it difficult to get banking and other services, and huge monthly payments. There’s a giant snowball that won’t be easy to get rid of, but it’s possible.
Naturally, the difficulties that a borrower may face are different and each situation is unique. One is passionate about “fast money” and suddenly realizes that this passion is starting to make life difficult, another has a sting – health problems or lost jobs, another in business failure, etc. So there is no universal advice that could be given to everyone.
First of all, it is desirable to go to your bank and tell the situation
A bank specialist will evaluate it and help you find a solution. Second, if there are multiple credits, you need to understand which one is most important. For example, if you have a mortgage, not paying it can end up with a foreclosure. This is also likely to be your most important payment.
It is extremely important to evaluate your budget and give up all that is unnecessary. It may be a weekly cinema visit or a more careful shopping choice with a focus on discounts. Impulsive purchases must be abandoned. In this respect, it is worth considering online shopping, which allows you to make smart purchases within a certain budget without a hurry. It is extremely difficult psychologically to give up the standards of life you are used to, but stepping back, you can then go up again, but with the experience, you have in your pocket.
Small loans are pushing – who can help you?
Someone who gets stuck in small loans sometimes feels like he’s in a vicious circle. Different non-bank lenders offer to combine all your loans so that you owe it to only one company. The Latvian Association of Alternative Financial Services, which represents legal non-bank credit institutions, offers a solution for those who are no longer able to meet their credit obligations.
To avoid situations where the penalty interest rate increases to the amount borrowed, go to this organization and they will help you to negotiate with the lenders for gradual debt repayment. However, this applies only to companies that are members of the association and agree on fair play principles.
Sometimes you get the feeling that you are left alone with your problems and there is no way out of it – you don’t have the courage to go to the bank because there seems to be no solution. However, it is important to remember that even in the most difficult situations it is possible to find a way out. A focused and disciplined approach to managing your finances and reviewing your daily routine is important, as is an open and timely conversation with your lender.
Banks have the potential for credit restructuring, which means changing the terms of a loan to reduce loan payments for a certain period of time and make it easier to meet liabilities. The main goal is to get the borrower back to full compliance. It is possible to arrange a “credit holiday” or deferral of the principal of the loan or extension of the loan repayment term. This will allow you to reduce your monthly payments for a limited period and allow you to recover from a difficult situation.
It is also possible to negotiate a combination of several short-term loans in a single extension agreement – this solution helps to structure all the loans (eg credit line, credit card, consumer credit) in one go and to start repaying them. In the case of both short-term and long-term loans, it is also possible to add “small” loans to “large” loans, which significantly reduces the monthly payment of the total liabilities.
Snowball – hurrying forward
Problems with credit are all over the world – people sometimes like to spend more than they can earn. You may find you have some tips from American psychologists on how to gradually get rid of credit. Snowball method. The idea is quite simple. List all your credit payments on the page, from the lowest amount to the highest. If there are two similar payments, the first is the one with the higher interest rate.
Set aside any amount that is available to you in addition to covering the payments and write off every month the smallest amount of credit. When you’re done, move on to the next one. The amount you will be able to afford will increase because there is one credit less. Continue until all credits are paid. The advantage of this method is that you will feel the results pretty quickly, leaving behind one small credit after another.
The second method is similar but more economically sound. Do the same as above, just the other way around – this time we’ll start with the biggest loan with the highest interest payment. The disadvantage of this method is psychological – it will take longer to pay off the first loan, but it will pay off.
Deleting the principal amount of the loan with the highest interest will reduce your total cost more rapidly, but the moment it is paid off will be a real holiday, with the pleasant feeling that the dog is in breach. It is important at this point not to “break” for joy and to continue what you are doing. Take and start repaying the next loan with the highest interest payment and it’s up to the winning end.